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Whoops! I printed out my year-end summary of distributions from my health savings account recently and saw a debit to a local take-out shop, Garelick & Herbs, for $12.62, obviously not an eligible medical expense. You’d figure you could simply return funds to the account if you make the mistake of pulling the wrong card out of your wallet, but nothing’s simple when it comes to the tax code, is it?

I checked the frequently asked questions from my HSA administrator, OptumHealthBank: “How do I report withdrawals that are used for non-eligible expenses? You must report distributions for ineligible expenses. Consult your tax advisor for specifics.” Hmmm.

Instead of emailing my CPA, I thought I’d try reading the Internal Revenue Service’s 7-page instructions to Form 8889 that you have to attach to your federal tax return if you have an HSA. Turns out you have to report distributions for non-medical expenses as taxable on your 1040 and pay a 20% penalty. More on that later.

Health savings accounts, which have only been around since 2004, come coupled with high deductible health plans. The number of Americans covered by these accounts has grown from 6.1 million in January 2008 to 13.5 million in January 2012, according to America’s Health Insurance Plans Center for Policy and Research.

Both you and your employer can contribute to your account on an annual basis—a combined total of $3,250 for an individual or $6,450 for a covered family (plus a $1,000 catch-up contribution for those 55 and older) for 2013. The money you contribute reduces your taxable salary, meaning thousands in tax savings for high-income folks. Like a 401(k) retirement account, the HSA is yours to keep. You can invest it, and it grows tax-free.

When you take money out for qualified medical expenses (defined in IRS Publication 502)–now, or in retirement– it comes out tax-free. Unlike a pre-tax healthcare flexible spending account, where you forfeit any unused balance at the end of the year under the use-it-or-lose-it rule, you can roll over any unused balance with an HSA, building a tax-free healthcare retirement kitty. Basically, it’s an incredible deal if you have the ability to save.

The catch is the paperwork. You have to keep records to prove that any distributions were for medical expenses. Then there’s the 20% penalty (up from 10% to help pay for Obamacare). It applies if you use the money you’ve saved in the account for non-medical expenses before age 65; once you turn 65, you can use HSA money for non-medical expenses without facing the 20% penalty, but you’ll still owe income taxes.

Here’s the rule on distribution mistakes: HSA distributions that are made by mistake can be returned to the HSA if there is clear and convincing evidence that the distribution was made “because of a mistake of fact due to reasonable cause.” In other words, if you thought something was a covered medical expense but it turned out it wasn’t. I asked Amy Gordon, an employee benefits lawyer with McDermott Will & Emery in Chicago if my take-out mistake would count under this exception. No luck. “I’m not sure I personally could make that argument with a straight face even if my lunch consisted of only ‘super foods,’” she said.

So what’s the cure? Enter the amount of ineligible distributions as “Taxable HSA Distributions” on Line 16 of Form 8889 (Health Savings Accounts) and include this amount in the total on Form 1040, line 21, entering “HSA” and the amount on the dotted line. Then calculate your additional 20% tax on line 17b and include this amount in the total on Form 1040, line 60, and write “HSA” and the amount on the dotted line.